During the journey to EreborBilbo Baggins is captured by the goblins of Goblin Town together with the Dwarves of Thorin Oakenshield. They are brought before the Great Goblin, who accuses them of spying, and is enraged when he finds out Thorin is carrying Orcrist, a sword the Great Goblin remembers from Gondolin. With the help of Gandalf the wizard Bilbo and the Dwarves escape and kill the Great Goblin, after which a frantic pursuit occurs.

Goblin Town is a series of tunnels and caverns, which lead all the way through the mountains, with a "back door" near the Eagles' eyrie in Wilderland. The cave of Gollum is close to this door.